Recap & Macro Outlook: Fear and Greed

Michael W M Rudd, CFA | President, CEO & Portfolio Manager

Should we panic? Stocks are down, bonds are down … even Bitcoin is down! If you watch the financial press, you could get really concerned. However, the US equity market is off only 7.8% from all-time highs. Global markets are essentially the same with Japan down 4.6% and Europe down only 3.7% (this may change tonight given current futures markets). During these events, we look past the fear and look at the data. In our recently released annual reviews and outlooks, we noted that we believe the US and global economies were synchronized and doing well. We also noted that if we were going to worry about anything, it would be the valuation of the various stock and bond markets around the world. Valuations can get adjusted either by price corrections (severe and quick in terms of bear markets) or by fundamentals (slow and steady where prices stay flat while the stocks “grow into” the valuation).

In terms of the economy, on Friday there was a very strong Employment report out of the US that demonstrated no slowing in the job market but did point to a little bit of wage inflation, which is what we think spooked the market. This morning, there was a very strong business survey reports (Markit & ISM Services) which caused an intra-day recovery before markets turned lower again into the close. Both data points are in the charts above and are what we focus on instead of the headlines in the press and talking heads on TV.

“This means that” we continue to focus on buying high quality companies. We have been holding a higher cash position than normal, so we feel somewhat protected. We will use recent volatility to reposition our portfolios and hopefully find some good bargains.

At the end of January, most of the portfolio management team went to a conference where we were fortunate enough to interview senior managements (CEOs. & CFOs) of a number of our portfolio companies. Please expect us to highlight what we learned over the coming weeks.

Pathfinder Asset Management Ltd. | Equally Invested™
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Sources: Pathfinder Asset Management Limited

National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit for full disclosures.

*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).

Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.